Nov 12, 2008

The book and blog show that actuaries (and accountants as well) were not disciplined enough to resist politicians pressure and large companies board (and shareholder) short-term result demands. As a direct consequence those companies got into serious trouble.

Stick to one's guns, and keeping a save eye on the future, is one of the essentials of the actuarial profession.

Training (not just study alone) in giving the right push back on board level, should therefore be an obligate part of the education (and accreditation) of actuaries and accounts.

Actuaries are almost just like real human beings: after a few years successful studying and modeling, they gain confidence. They start to believe that reality will also act according their models. Moreover, they might get overconfident and think that their view and expertise on reasonably well predictable issues like life, death and disability are - with the same amount of certainty - also applicable on other issues like 'inflation' and the development of the 'stock market'.

This it typically a case of :

That what develops you, eventually might kill you

Practice hasn't shown that good actuaries are,by definition, also good weatherman.

The book also shows that self-regulating without clear targets and constraints is a fairy tale.

Keep in mind the Mongolian Proverb:

Of the good we have an understanding,for fools we keep a stick upstairs

Disclaimer

Maggid is an actuarial professional, and like every actuarial professional or human being, he makes mistakes. Maggid encourages you to do your own independent "due diligence" on any idea that he talks about, because he could be wrong.

Nothing written here, or in my writings at Actuary-Info is an invitation to undertake whatsoever action, in particular to buy or sell any particular security; at most, Maggid is handing out educated guesses as to what the markets may do. Maggid thinks that "The markets always find a new way to make a fool out of you", and so he encourages caution with every action, in particular in investing. Risk control wins the game in the long run, not bold moves.

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